|Eat Your Peas and Tighten Your Belt!|
In a sane world, the Great Unexpected Shriveling would be cause for a mighty injection of some stimulative hormones in the form of a massive government-run jobs program, a financial transaction tax, a living wage law, appropriating the excessive wealth of the entire Walton Family with a special 90% Surtax Law enacted just for them, the breaking up of the too-big-to-fail/jail banks, Medicare for All and etcetera and so forth. We've shouted the solutions from the rooftops till we're hoarse.
What should be a wake-up call to the Austerity Cult will no doubt cause the deficit scolds to double down and call for even more cuts, leading to a recession or worse. Stay tuned for an amping up of their belt-tightening talking points. Paul Krugman is calling it the incestuous amplification effect. A group of elites in a bubble feed off one another's propaganda and then give birth to an unviable, genetically disenfranchised monster of an austerity policy. Pain for thee, riches for me. It's all about the perpetuation of the worst wealth inequality since the Gilded Age.
Meanwhile, Dean Baker is debunking one of the great economic myths of the Age of Obama: that the Bush tax cuts and two unfunded wars caused the deficit. They didn't. It was the market bubble. The much-ballyhooed "surplus" of the Clinton era was anything but. The revisionist history of "Clinton Paradise Lost" is only a fairy tale. Also see Gramm-Leach-Bliley.
It also turns out that a reduction in military spending was a big cause of the unexpected contraction. So the endless wars have been artificially bolstering the economic numbers all this time! It was a War Bubble! No wonder it never felt like a real recovery to most of us. But now that the American Empire has extended its phony war on terror to the African continent in order to contain China, perhaps the contractions will ease when the market gives birth to yet another freak of nature to add to its already diseased, extended family.